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Case 1Tasks: Describe what participative budgeting is, including its benefits and shortcomings.Summarize two good scholarly journal articles on participative budgeting.Case 2Ashley Finn is a new...

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Case 1


Describe what participative budgeting is, including its benefits and shortcomings.

Summarize two good scholarly journal articles on participative budgeting.

Case 2

Ashley Finn is a new production manager. After a great deal of effort, including considerable market research, she completes her budget and submits it to her boss, Keith Payne. Without even looking at it, he asks her what her "fudge factor" was and which items contained the most slack. Ashley, very surprised, responds that she doesn't use any fudge factor and that all her figures are honest. Payne counters by asking her how she would respond if she had to cut about 20% from her budget, as it is. He tells her that most budgets are trimmed in committee and she had better be ready. He returns the budget to her and tells her to come back with something reasonable.


Analyze if it is ethical to build slack into a budget.

Explain if it was ethical for Payne to refuse to accept a budget without slack.
Answered 2 days After Jun 07, 2023


Nitish Lath answered on Jun 10 2023
24 Votes
Case 1
Participative budgeting: Detailed analysis
Participative budgeting can be defined as a budgeting process under which the lower level of management is involved in the preparation of the budget and inputs are considered by top management based on inputs of lower management. The lower level of management is more capable to provide real inputs such as the availability of resources, the time required to prepare the budget, difficulties, and challenges during the execution process, etc. and there are higher chances of achievement of targets under participative budgeting.
Participative budgeting: Advantages
The advantages of participative budgeting are as follows:
· Due to the involvement of lower level management, the confidence of lower and superior management reinstate as both parties have shown their interest and revalidation of inputs.
· Due to sharing of the budget by the concerned department, there are very less chances of over or under-budget preparation (Heinle, M. S., Ross, N., & Saouma, R. E., 2014).
· The efficient allocation of resources can be made and wastage of resources can also be avoided.
· It allows useful exchange of information from bottom to top and timely reports can be presented to concerned departments.
· It helps to improve employees' morale and increased efficiency.
Participative budgeting: Disadvantages
The disadvantages of participative budgeting are as follows:
· Participative budgeting is the most time-consuming process as compared to imposed budget because the process involves budget preparation from bottom to top and it can derail the entire process (Jeff Schmidt, 2023).
· The major disadvantage of participative budgeting is budgetary slack. The employees may overestimate the costs or underestimation revenue projections so that the actual targets can be manipulated.
· The budget cost can also be very high due to the involvement of various people and sometimes may not be an effective process for budget preparation.
Analysis of two journal articles
We have selected two journal articles related to participative budgeting. In the first article, the theory of participative budgeting has been discussed. In the article, the principal’s choice between top-down and bottom-up approaches has been discussed. The article has concluded that under the bottom-up approach, the surplus is always maximized...

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